Blockchain Technology Could Disrupt and Reboot the Sharing Economy

“The core of the sharing economy is people renting things from each other,” reads a 2013 reference article published in The Economist. “[Airbnb] is the most prominent example of a huge new ‘sharing economy,’ in which people rent beds, cars, boats and other assets directly from each other, coordinated via the internet.”

In retrospect, this article was a clear harbinger of the age we now live in. Airbnb and Uber are still the first names that come to everyone’s mind when thinking about the sharing economy.

But it’s worth remembering that you don’t rent the services of your Uber driver or the property of your Airbnb host directly. The companies stand as intermediaries and take their cut. There’s a growing perception that the sharing economy should really be peer-to-peer, without intermediaries. The current intermediaries wouldn’t like that of course, but the real service providers would and so would the customers, provided a decentralized sharing economy could lower the prices while offering the same quality and guarantees.

The New Economy

The emerging sharing economy is huge and its main players are rising giants. Uber is valued at more than $50 billion, Airbnb at more than $30 billion and Lyft, the closest Uber competitor in the U.S., is rising fast with a current valuation of $7.5 billion. In China, Uber competitor Didi Chuxing, which bought Uber's China business last year, recently closed a $5.5 billion funding round, making it one of the world's most valuable private technology companies at an over $50 billion valuation.

It’s not surprising, therefore, that there’s a lot of speculation on how distributed ledger technology could disrupt, reboot and boost the sharing economy. According to a recent story published in Forbes, “the fusion of blockchain and the sharing economy may create a revolution that will transform our economy and share the wealth beyond certain companies and individuals.”

MyBit wants to leverage distributed ledgers to “democratize” the ownership of drones, self-driving cars, smart homes, autonomous machinery, 3D printers and more. After a successful crowdfunding round, the company has chosen decentralized energy grids, with a direct peer-to-peer marketplace for clean energy generated with solar panels as a first initiative.

The Smart Contracts Revolution

Smart contracts have huge potential in the sharing economy. As early as 1997, legendary cryptographer Nick Szabo spoke of smart contracts that solved the problem of trust by being self-executing and having property embedded with information about who owns it. For example, the key to a car might operate only if the car has been paid for according to the terms of a contract.

“These protocols would give control of the cryptographic keys for operating the property to the person who rightfully owns that property, based on the terms of the contract,” noted Szabo. “In the most straightforward implementation, the car can be rendered inoperable unless the proper challenge-response protocol is completed with its rightful owner, preventing theft.”

Slock.it, a German firm specialized in blockchain and IoT applications, is one of the companies moving to realize Szabo’s vision of smart contracts embedded in IoT-enabled devices. Smart locks powered by blockchain-based smart contracts could enable anyone to rent out anything that can be locked, like a house or a car, without intermediaries.

This business model seems like an Airbnb killer. But things appear slightly more complex for cars as Uber doesn’t rent just a vehicle, but also a driver.

But many technology firms (including the ride-hailing leaders themselves) are now exploring the coming era of autonomous driving. With fleets of self-driving cabs, customers could call a car with a tap in a phone screen and the car would drive itself to pick customers up. Then the question becomes: Who needs Uber (or Lyft, or Didi Chuxing) for that? Smart blockchain-powered apps seem able to deliver without the middleman.

With blockchain technology, car use agreements can be “validated between two parties via executable distributed code contracts to eliminate the need for financial intermediaries,” noted a recent Distributed article. The Toyota Research Institute is prototyping the Ethereum blockchain as an alternative to Uber and Lyft.

In fact, it can be argued that the current version of the sharing economy works to enrich the platform owners while preying on the value creators. Eventually, centralized sharing economy platforms controlled by single owners could be replaced by decentralized cooperatives enabled by crypto-tokens on a distributed ledger. In other words, Uber without Uber, controlled by the commons, where all revenue after overhead costs goes to the members of the co-op, who also control the platform and make decisions.